Correlation Between Pace Large and Pace Small/medium
Can any of the company-specific risk be diversified away by investing in both Pace Large and Pace Small/medium at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Pace Large and Pace Small/medium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace Large Value and Pace Smallmedium Value, you can compare the effects of market volatilities on Pace Large and Pace Small/medium and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Pace Large with a short position of Pace Small/medium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Large and Pace Small/medium.
Diversification Opportunities for Pace Large and Pace Small/medium
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Pace and Pace is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Value and Pace Smallmedium Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Smallmedium Value and Pace Large is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Pace Large Value are associated (or correlated) with Pace Small/medium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Smallmedium Value has no effect on the direction of Pace Large i.e., Pace Large and Pace Small/medium go up and down completely randomly.
Pair Corralation between Pace Large and Pace Small/medium
Assuming the 90 days horizon Pace Large is expected to generate 1.72 times less return on investment than Pace Small/medium. But when comparing it to its historical volatility, Pace Large Value is 1.57 times less risky than Pace Small/medium. It trades about 0.3 of its potential returns per unit of risk. Pace Smallmedium Value is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,029 in Pace Smallmedium Value on September 1, 2024 and sell it today you would earn a total of 181.00 from holding Pace Smallmedium Value or generate 8.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace Large Value vs. Pace Smallmedium Value
Performance |
| Timeline |
| Pace Large Value |
| Pace Smallmedium Value |
Pace Large and Pace Small/medium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Large and Pace Small/medium
The main advantage of trading using opposite Pace Large and Pace Small/medium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Large position performs unexpectedly, Pace Small/medium can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pace Small/medium will offset losses from the drop in Pace Small/medium's long position.| Pace Large vs. Principal Lifetime Hybrid | Pace Large vs. Touchstone Large Cap | Pace Large vs. Tax Managed Large Cap | Pace Large vs. Federated Kaufmann Large |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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